Chevron reported earnings of $1.75 billion ($0.87 per share - diluted) for the second quarter 2009, compared with $5.98 billion ($2.90 per share - diluted) in the 2008 second quarter. Foreign-currency effects reduced earnings in the 2009 quarter by $453 million, compared with a benefit to income of $126 million a year earlier.
For the first half of 2009, earnings were $3.58 billion ($1.79 per share - diluted), down 68 percent from $11.14 billion ($5.38 per share - diluted) in the first six months of 2008.
Sales and other operating revenues in the second quarter 2009 were $40 billion, compared with $81 billion in the year-ago quarter. First-half 2009 revenues were $75 billion, versus $146 billion in the corresponding 2008 period. The decline in both comparative periods was primarily due to lower prices for refined products, crude oil and natural gas.
"Operationally, we had another very successful quarter," said Chairman and CEO Dave O'Reilly. "In our upstream business, we had major project start-ups at Tahiti in the Gulf of Mexico and Frade offshore Brazil, and our company's net oil-equivalent production increased 5 percent from a year ago. In our downstream operations, refinery utilization was higher than in last year's second quarter."
O'Reilly said a 79 percent drop in upstream quarterly earnings, which was driven by lower prices for crude oil and natural gas, was offset only partially by improved results in the downstream segment. "Although our downstream results were better than a year ago, the demand for refined products remained generally weak," O'Reilly added. "Sales margins in this year's second quarter were narrow, and our U.S. downstream business operated at a loss." On a companywide basis, O'Reilly said aggressive cost-management efforts resulted in about a 15 percent decrease in recurring operating, selling, general and administrative expenses between periods.
In additional comments on upstream activities, O'Reilly said another deepwater project is expected to start up this year at 31 percent-owned Tombua-Landana in Angola. Total maximum oil-equivalent production of approximately 100,000 barrels per day is projected to be reached in 2011. Recent milestones for other upstream projects were achieved in:
UPSTREAM -- EXPLORATION AND PRODUCTION
Worldwide oil-equivalent production was 2.67 million barrels per day in the second quarter 2009, up 133,000 barrels per day, or about 5 percent, from 2.54 million in the 2008 second quarter. The increase was driven by project start-ups since last year's second quarter and the impact of lower prices on cost-recovery and variable-royalty volumes in certain production contracts outside the United States. Production quotas imposed by OPEC curtailed company crude-oil production in the 2009 second quarter by about 35,000 barrels per day.
U.S. upstream earnings of $273 million in the second quarter of 2009 were down $1.9 billion from a year earlier on sharply lower prices for crude oil and natural gas. Operating expenses were lower between periods, but this benefit to income was more than offset by higher depreciation expense, including charges of approximately $100 million for asset impairments in this year's second quarter.
The average sales price per barrel of crude oil and natural gas liquids was approximately $50 in the 2009 quarter, compared with $109 a year ago. The average sales price of natural gas was $3.27 per thousand cubic feet, down from $9.84 in last year's second quarter.
Net oil-equivalent production of 700,000 barrels per day was down 2,000 from the second quarter 2008. A production increase of approximately 60,000 barrels per day between periods was associated with the late-2008 start-up of the Blind Faith Field and the start-up in this year's second quarter of the Tahiti Field, both in the Gulf of Mexico. This impact was offset, however, by normal field declines, production shut in as a result of last year's hurricanes and asset sales. The net liquids component of production was up about 7 percent to 467,000 barrels per day. Net natural-gas production of 1.40 billion cubic feet per day in the 2009 quarter declined 12 percent between periods, with most of the decrease associated with normal field declines, asset sales and the hurricane effects.
International upstream earnings of $1.2 billion decreased $3.8 billion from the second quarter 2008 due mainly to lower prices for crude oil and natural gas. Foreign-currency effects decreased earnings by $476 million in the 2009 period, compared with an increase of $80 million in last year's second quarter. Depreciation expenses were higher between periods, and the 2009 quarter included charges of about $100 million for exploratory well write-offs.
The average sales price per barrel of crude oil and natural gas liquids in the 2009 quarter was $53, compared with $110 a year earlier. The average price of natural gas was $3.73 per thousand cubic feet, down from $5.44 in last year's second quarter.
Net oil-equivalent production of 1.97 million barrels per day in the second quarter 2009 was up 7 percent, or 135,000 barrels per day, from a year ago. Included in the increase was about 185,000 barrels per day of production associated with the start-up since last year's second quarter of two major projects in Nigeria and Kazakhstan. Decreases to production between periods resulted mainly from OPEC-related curtailments of 35,000 barrels per day, 30,000 barrels per day that were offline due to civil unrest in the onshore area of Nigeria, about 25,000 barrels per day of lower oil-equivalent natural gas production in Thailand and the effect of normal field declines. The impact of lower prices on cost-recovery volumes and other contractual provisions affecting Chevron's share of production resulted in a net increase of about 85,000 barrels per day between periods. The net liquids component of production increased about 11 percent from a year ago to 1.37 million barrels per day, while net natural gas production declined about 1 percent to 3.59 billion cubic feet per day.
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